Tag Archives: economy
Better lending conditions leads to rise in first time buyers in Northern Ireland
Better mortgage conditions have led to Northern Ireland seeing 25% more first time buyers in in the third quarter of 2014 than a year ago, according to data from the Council of Mortgage Lenders. Then figures point to significant growth in first time buyer and home mover activity with first time buyer loans 25% up on the third quarter 2013. The number of loans to home movers increased by 5%compared to the second quarter and were up 36% compared to a year ago. However, remortgage lending in Northern Ireland declined quarter on quarter in both volume and value. It also declined in number of loans compared to the third quarter of 2013. The data also showed that first time buyer affordability being favourable may account for this growth. First time buyers typically borrowed 2.73 times their gross income, considerably less than the UK average of 3.41. The typical loan size for first time buyers was £80,000 in the third quarter, unchanged from the previous quarter. The typical gross income of a first time buyer household rose to £29,768 compared to £27,009 in the second quarter. First time buyer monthly payment burden decreased to 16.2% of gross income being spent to cover capital and interest payments in the third quarter, from 17.6% in the previous quarter, remaining lower than 19.6% in the UK overall. Affordability for home movers also improved, with home movers typically borrowing 2.45 times their gross income compared to 2.5 in the second quarter but substantially less than 3.05 for the UK overall in the period. The typical loan size for home movers was £103,500 in third quarter, down from £104,000 in the previous quarter. The typical gross household income for home movers was £44,000 in the third quarter compared to £41,241 in second quarter. Home movers' payment burden remained low in Northern Ireland compared to the UK at 16.1% of gross income being spent to cover monthly capital and interest payments, slightly up from 15.9% in the second quarter but less than the 18.8% UK average. ‘Northern Ireland saw higher house purchase lending growth year on year than the UK overall in the third quarter. The Northern Irish market in 2013 was really driven by first time buyers but this year we have seen a resurgence of growth in home movers, suggesting it is becoming easier to transact,’ said Derek Wilson, chairman of CML Northern Ireland. ‘Borrowers are seeing good affordability conditions as the economy recovers, attractive rates are being offered by lenders, and there is further choice available through government schemes like Help to Buy,’ he explained. ‘Two quarters have passed since the new Financial Conduct Authority rules were introduced and they do not seem to have had any unintended consequences in the Northern Ireland market. This is not surprising given that house prices and the amount people borrow next to their household income is less than the UK average. The Northern Ireland market is open to those who aspire to be home owners,’ he added…. Continue reading
Home sellers likely to benefit from new UK property tax rules as well as buyers
House sellers in the UK could be set to save £213 million a year to the tune of almost £7,500 each, according to research by property website Zoopla. The reform of the stamp duty property tax which took effect today will remove ‘dead zones’ that existed before each previous Stamp Duty band and see a more progressive approach adopted where buyers will only liable to the portion of the property’s value above each new level. In an analysis of property sales in the 12 months to May 2014, the firm reckons that 28,635 properties have been under priced in order to make them more appealing to buyers by avoiding steep jumps in stamp duty. Zoopla found that the number of property sales in the price bands immediately before an existing stamp duty threshold is significantly higher than expected, while the number of sales in the price band immediately after a threshold, the stamp duty dead zone, is considerably lower. ‘The new, graduated Stamp Duty system is a long overdue overhaul to what the Chancellor admitted was a poorly designed tax and represents a fairer system for the vast majority of home buyers,’ said Lawrence Hall of Zoopla. ‘It also means that those selling their home at certain levels are more likely to achieve the real value of their homes and won’t be forced to discount their properties to sneak under certain bands,’ he explained. ‘Unfortunately those buying property worth more than £937,000 may feel unduly penalised by the new reforms, but the new structure represents a more balanced system overall and a welcome alternative to the mansion tax plans that had been proposed,’ he added. As an example, a house purchased at £300,000 would have resulted in a £9,000 stamp duty bill. With the new system, a buyer will save £4,000 calculated as follows: 0% tax up to £125,000, 2% tax on £125,000 to £250,000 which is £2,500, 5% tax on the remaining £50,000, which is £2,500, leading to a total stamp duty bill of £5,000. Kevin Hollinrake, managing director of Hunters estate agents with 125 branches nationwide, said the firm has already had deals secured as a result of this change. ‘In our opinion, this is great news. For too long, stamp duty has distorted the market deterring sellers from marketing their homes and buyers from buying them in the dead zones above the key thresholds such as £250,000 and £500,000. This should mean more property coming onto the market, and therefore, more sales which is good for the housing market and the economy as a whole,’ he explained. There will be substantial savings for around three quarters of a million home buyers across England and Wales according to research from Savills as all buyers up to £937,000 will benefit. By contrast, around 17,000 transactions above a value of £937,000 will bear an increased stamp duty tax burden, undermining the case for any further taxation of high value property. ‘The change is likely to make the… Continue reading
Annual rate of UK property price growth down for third month in a row
UK house prices increased by 0.3% in October but the annual pace of growth has slowed to 9%, according to the latest index from the Nationwide Building Society. It is the third month in a row when annual growth had moderated and according to Robert Gardner, Nationwide’s chief economist, housing market activity levels have remained relatively weak in recent months. He pointed out that the number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year and 27% below the long term average. Similarly, housing market turnover rates are well below long term averages. For example, the number of mortgage transactions is currently equal to around 4% of the housing stock, well below the long run average of 6%. ‘There is something of a disconnection between the slowdown in the housing market in recent months and broader economic indicators, which have remained relatively upbeat. While cooling in the London market is a part of the story, this is unlikely to be main explanation for the slowdown,’ he said, adding that in the third quarter of the year 10 of the 13 UK regions saw the pace of annual price growth slow and two regions saw quarterly price declines. This comes against a background where the labour market has continued to improve, with employment rising strongly and the unemployment rate falling sharply in recent months. Moreover, indicators of consumer sentiment remain elevated, where healthy rates of retail sales growth and new car registrations also suggest that households are feeling more confident. ‘Affordability does not appear overly stretched, at least at the UK level, with first time buyers continuing to represent an unusually high proportion of mortgage activity and with typical mortgage payments as a share of average income close to the long run average,’ Gardner explained. ‘Historically low mortgage rates have helped to mitigate against the fact that house prices have been outstripping income growth. Forward looking indicators, such as new buyer enquiries point to further softness in the near term,’ he said. ‘However, if the economy and the labour market remain in good shape and mortgage rates do not rise sharply, activity is likely to pick up in the quarters ahead,’ Gardner added. According to Graham Davidson, managing director of Sequre Property Investment, the moderation has been felt most acutely in London where the rate of growth is beginning to slow thanks largely to more stringent lending criteria. ‘Another factor is a slowing in demand as many begin to look at property outside the capital due to its extortionate prices. The region is, however, still leading the way in terms of growth and house price rises,’ he said. ‘There is certainly an element of seasonality behind this slow down, but we feel that this decrease in the rate of growth could signal the start of a slowing property market. The impact of the Mortgage Market Review (MMR) should not be underestimated. As Nationwide reports, the… Continue reading
